The best mortgage rates are offered to those with the highest credit scores. This is true now more than ever. Since the housing market crashed, lenders only offer good mortgage rates if homebuyers have good credit scores.
If a borrower’s credit score is too low, the loan may not be approved at all. People with the best credit scores are the least risky for lenders, and since lenders are more discerning about giving loans to borrowers who may default these days, only homebuyers with good credit scores will be given the opportunity to borrow on a new home at a reasonable rate.
Before the housing market crashed, lenders were giving mortgage loans to borrowers with bad credit scores in the low 500s and even high 400s. Now, potential homebuyers need a credit score of 620 or higher to qualify for an FHA loan.
To get the best interest rate and loan terms, borrowers need to have a high credit score of 760 or 780. If the credit score is 800 or more, potential homebuyers have the easiest time getting approved for a home loan and will have the fewest fees.
The difference in scores really adds up, especially in the pocketbook of homeowners. For example, if a borrower’s credit score is 620, he or she may get a $200,000 home loan for 6 percent compared to 4 percent if his or her credit score is 760. The difference in percentages could add up to more than $70,000 paid in interest over the life of the home loan. Definitely not chump change.
Homebuyers should make sure to build up and maintain the best credit score possible. It could make one of life’s biggest investments a lot easier to pay for.